Entrepreneurs constantly ask me how to pitch VCs. Most of the time, I push them to a different route.
To have a great business does not mean you have to have outside venture capital. I have run businesses backed by VCs, and those without. These days, you don’t actually need a tremendous capital base to get started. You can start a company for very, very little.
It’s worth reading The Ultimate Cheat Sheet for Starting and Running Your Business. There’s also a great list of free things on the web to help you bootstrap your business.
However, inevitably, most entrepreneurs want to try to pitch their business to someone. The pitch may only be to family and friends (always the best place to start), or to a big Sand Hill VC. And they also want to know how to write a business plan (the two are not the same).
Pitch decks are those spiffy, slick and often meaningless presentations that are supposed to get you the millions your company deserves.
The problem is, like everything in the Valley these days, it’s all the same. Going to this site [or this one] will dazzle you with the sexiest pitch decks (dare I say the “bubble in the making” here?). However, it’s an orgy of homogeneity, a grand sameness that’s a testament to a startup culture that’s trying to be different, by being the same.
Where’s the risk in putting together a presentation that looks the same as everyone else’s? Not much. What’s riskier is not having a great idea and a great team.And therein lies the essential question: What do investors really care about?
Just two things stand out: a big idea and a great team.
A big idea has the following characteristics:
– It addresses a big, big market. Like – billions and billions being spent. Going after a $20 million market,meh. Going after a $300 billion market,hmmm…
– There’s a big, fat opportunity. There’s something missing in the market, or something that’s going to be happening, that opens the door to your product or service being a massive success. Your technology needs to be different, disruptive and interesting. And if you can’t reasonably forecast your company getting to several hundred million in revenue, then rethink the VC route.
– It’s different. Being the 10th also-ran player in a market is not interesting. That doesn’t, however, mean you have to be obsessed with being different. It’s just you need something that sets you apart from all the rest. (A good start is to read the 3 most powerful words every brand needs.)
But let’s dig a little further. Venture investors (as opposed to private equity investors) aren’t investing in startups just to get 2-3x return on their money. The venture model is fairly simple: each investment has to have the potential to generate outsized returns –10x return – a “ten bagger”.
So, you need an idea that will generate outsized returns.The classic pitch deck, as outlined by a colleague (Mark Wright at BCVC) has the following elements:
1. Investment highlights
2. Platform/Business Description
3. What compelling problem does it solve
4. Target Customers
5. Competitive dynamics/ current customers – if any
6. Barriers to entry
7. Management team
8. Holes in team
9. Financial model
10. Amount being raised/Use of proceeds
11. Operational and financial milestones/How is our performance to be judged
12. Three year quarterly projections that includes the quarterly can burn rate
13. Client references
14. Repeat investment highlights.
Good. That’s a start, and a good checklist to keep in mind.
Basic rules for the pitch itself are to accept questions and interruptions during the pitch. Give it 45 minutes max. Do not send out the pitch in advance. And don’t ask a VC to sign an NDA. Most won’t.
Business plans, on the other hand, are largely meaningless for raising capital (I’m excepting, of course, where it’s a prerequisite, such as an SBA loan). A good Powerpoint deck is often enough to get the discussion going from institutional investors.
However, you should write a business plan for your own use. Writing a great business plan means that you write something that will be a living, breathing document that gives an insightful analysis into the business objectives, priorities, plans, and methods of measurement. It is for use, not necessarily for investors. If you’re just going to print one up for investors and then forget about it, it’s a waste of time.
And if you’re looking for a template for a business plan, the reality is that there is no really good template for a business plan. Great business plans are real documents that reflect the mission, objectives, and plans that you expect to actually implement.
In other words, there is no template for common sense.